KOF Employment Indicator: Labour Market Has Passed Its Peak

The KOF Employment Indicator is no longer quite as high as it was in the second half of last year. The Business Tendency Surveys conducted by KOF in January reveal that the Indicator now stands at 4.2 points, which is 0.7 points lower than three months ago and 1.5 points lower than six months ago. Despite having fallen recently, the Indicator remains well above its long-term average, which is close to zero. This means that although companies’ employment prospects are still good, they were even better around the middle of last year. The Indicator suggests that the upturn in the Swiss labour market has probably already peaked.

The Employment Indicator is calculated from the quarterly KOF Business Tendency Surveys. When conducting these surveys, KOF asks firms to assess their present staffing levels and to say whether they plan to alter them over the coming three months. On balance, a majority of these companies are currently of the view that their workforce is too small. Consequently, most of the firms surveyed expect to increase their headcount in the next three months. The KOF Employment Indicator represents the average of the surveyed companies’ employment assessments and expectations.

Good prospects in construction, accommodation and food services

The Indicator’s modest fall can largely be attributed to the slightly less optimistic assessment of the employment situation in ‘other services’. The large number of people employed in this sector – which includes firms engaged in transport, information technology, communications, social services and healthcare – make it highly significant for the Swiss labour market. Although the Employment Indicator for ‘other services’ fell for the second consecutive time, it remains at a relatively high level. Employment prospects also deteriorated slightly in the wholesale and retail sectors. By contrast, the Employment Indicator for accommodation and food services continues to deliver highly impressive results and is currently at its highest level in more than ten years. Construction is also performing well, with the KOF Employment Indicator for this sector rising further. In addition, employment assessments in the project engineering industry are highly encouraging: the survey findings reveal that many firms of architects and engineers are planning to create further jobs. Although the project engineering sector is fairly small, it is important because it usually acts as a leading indicator of business activity in the much larger construction industry.